ABC has completed algorithms and preliminary drawings for a fully automated, end-to-end unit dose drug distribution system for hospitals and nursing homes. The system is custom built for and fully compatible with all U. S. government hospital software. The system solves the most critical drug distribution problems plaguing these facilities: labor costs and errors. By combining inerrant digital technologies [computer, robotics, bar code, scanning, and radio frequency communications], and a new conceptual design, the system achieves previously unattainable medication dispensing speed and accuracy. It thereby dramatically reduces labor (primary nursing and pharmacy) and virtually eliminates error. Preliminary estimates suggest that, for VA hospitals alone, the technology could save between $20 million and $40 million dollars per year in labor and eliminate nearly 50 million medication errors annually. In Phase I research, ABC developed an innovative computer simulation of a VA hospital drug distribution system, before and after system installation. Simulation results strongly support labor savings assertions above. Also in Phase I, a central prototype component was successfully built/tested which further validated the system's design. In Phase II, ABC proposes to build and test the full, integrated system (including interface with VA software up to installation at an alpha test site.